A Senior Citizens Guide to Medicaid Spend Down in Ohio

As we age, planning for our healthcare and financial needs becomes increasingly important. For many senior citizens, understanding the intricacies of Medicaid and how it relates to our financial situation is crucial. One term that often comes up in discussions about Medicaid is “spend down.” Let’s explore what Medicaid spend down means, how it works, and what you need to know to navigate this process effectively. As with all Medicaid matters, applicable rules vary depending on state regulations; the following information relates to Ohio.

What Is Medicaid?

Medicaid is a government program that provides healthcare benefits to individuals and families based on income and resources. It is important to understand the specific Medicaid benefit you are seeking and the rules applicable to that particular benefit. For senior citizens, the focus is on Long-Term Care Medicaid benefits since most individuals receive health coverage under Medicare at age 65. Long-Term Care Medicaid covers some or all the costs associated with home-based community services (in-home care), assisted living, and skilled care (nursing home). However, to qualify for Medicaid, individuals must meet certain financial criteria, which is where the concept of “spend down” comes into play.

What Is Medicaid Spend Down?

Medicaid spend down refers to the process of reducing your countable assets to meet the financial eligibility requirements for Medicaid. An Applicant must meet the countable resource limit of $2,000.00, and if your assets exceed these limits, you will be denied Long-Term Medicaid benefits. The spend down process allows individuals to “spend down” their excess assets on allowable expenses to become eligible for Medicaid coverage. It is important to consult with an experienced attorney to guide you through the process to avoid making costly mistakes.

Why Is Spend Down Necessary?

The spend down process is necessary because Medicaid is designed to assist those who genuinely need financial help. By requiring individuals to reduce their assets, the program ensures that only those with limited resources receive assistance. This is particularly relevant for senior citizens who may have accumulated savings or assets over their lifetime but now require long-term care.

How Does Medicaid Spend Down Work?

Generally, the spend down process involves the following steps:

1. Determine Your Allowable Asset Limit: An individual Applicant is permitted to keep $2,000.00 of countable resources when applying for Long-Term Medicaid. If the Applicant is married, their spouse is permitted to keep additional assets based on the Community Spouse Resource Allowance determined each year. In 2025, the Applicant is allowed to keep $2,000.00, and their spouse is entitled to keep 50% of the couple’s combined assets up to a maximum of $157,920.00 (Meaning if the combined countable resources are $400,000.00, the couple must spend down $242,080.00 for the applicant spouse to be approved.) At a minimum, the spouse may retain $31,584.00. (Meaning if the combined countable resources are $30,000.00, the spouse may keep the entire $30,000.00.)
2. Identify Countable Assets: Not all assets are counted when determining Medicaid eligibility. Countable assets typically include cash, bank accounts, stocks, life insurance with a cash surrender value, real estate other than the primary residence, and bonds. However, certain assets, such as your primary residence, personal belongings, one vehicle, and retirement accounts in pay-out status (IRA, 401(k), 403(b), and other qualified accounts) may be “temporarily” exempt during the eligibility determination and the Applicant’s lifetime. (Exempt assets may and often DO lose their protection upon the death of the Medicaid recipient and/or spouse and are subject to Medicaid Estate Recovery – Payback to the State.)
3. Spend Down Your Excess Assets: Once you know your asset limit and what your total countable resources, you can begin the spend down process. All spend down purchases or expenditures MUST be for the benefit of the Applicant! This may involve paying for medical expenses, repairs, improvements and modifications to your primary residence, pre-paid funeral and cemetery expenses, furniture, laptops, televisions, replacing a vehicle, pre-paying household expenses if residing at home or intend to return home, and even family vacations. It’s essential to keep detailed records/invoices/receipts of these expenditures, as they will be required when applying for Medicaid.

Allowable Expenses for Spend Down

When considering how to spend down your excess assets, it’s crucial to understand what expenses are considered allowable under Medicaid rules. Some common allowable expenses include:

1. Medical Expenses: This includes out-of-pocket medical costs, prescription medications, and any necessary medical equipment.
2. Home Repairs/Improvements/Modifications: If you need to make your home more accessible, such as installing ramps or grab bars, these expenses can be counted toward your spend down. Replacing appliances, furniture, furnace, hot water tank, and your roof are allowable spend down expenses if you or your spouse reside in your home, or you intend to return home. Paying for a new addition on your child’s home is NOT an allowable spend down expense.
3. Pre-paying Funeral Expenses: In 2025, you can pre-pay for funeral and burial expenses up to $10,000.00 per person for anyone in your immediate family, which can help reduce your countable assets. The contracts must be irrevocable and unassignable.
4. Purchasing a Vehicle: If you need a reliable means of transportation, purchasing a vehicle may be an allowable expense.
5. Paying Off Debt: Reducing your liabilities by paying off debts can also be a valid way to spend down your assets.

Common Misconceptions About Medicaid Spend Down

There are several misconceptions surrounding Medicaid spend down that can lead to confusion and create an improper transfer and denial of Long-Term Medicaid benefits. Here are a few clarifications:

YOU CANNOT GIVE AWAY ASSETS: While some individuals believe they can simply give away their excess assets to their family, friends, charities, and trusts to qualify for Medicaid, this is not allowed. Medicaid has a five-year look-back period during which all asset transfers will be scrutinized. If you gifted assets during this time, you would face penalties that delay receiving Long-Term Medicaid benefits even if you meet all other criteria! There is NO allowable gifting limit. A common mistake is the annual gift tax exclusion. This is a rule for Gift Tax purposes ONLY. Those gifts are NOT exempt from Medicaid calculations.

All Assets Count: Not all assets are counted when determining Medicaid eligibility. As mentioned earlier, certain assets, such as your primary residence and personal belongings, may be exempt. Understanding what counts and what doesn’t is crucial for effective planning. You do not want to spend down more than you need too. This is especially true in spousal cases.

Spend Down Is a One-Time Process: Spend down is not a one-time event. If your financial situation changes, you may need to reassess your assets and make additional adjustments to maintain your eligibility for Medicaid. (If the Applicant is approved for Medicaid and later inherits or receives money/ assets or sells an exempt asset for example, they will need to spend down again to maintain eligibility.)

The Importance of Planning Ahead

Planning for Medicaid eligibility and understanding the spend down process is essential for everyone. By being proactive and informed, you can make strategic decisions that protect your assets while ensuring you receive the care you need and maximize the preservation of your assets.

Consider These Tips for Effective Medicaid Planning:

Start Early: The earlier you begin planning for Medicaid, the more options you will have. Waiting until you need care can limit your choices and complicate the spend down process.

Keep Detailed Records: Maintain thorough documentation of all expenditures related to your spend down. This will be invaluable when applying for Medicaid and can help avoid potential issues.

Consult with Professionals: Given the complexities of Medicaid regulations, it’s important to consult with an elder law attorney specializing in Medicaid Planning BEFORE you need to apply or think you may need to apply for Long-Term Medicaid. They can help you navigate the spend down process and ensure that you are making informed decisions.

Empowering Your Financial Future

Understanding Medicaid spend down is a vital aspect of financial planning for senior citizens. By knowing how to manage your assets and navigate the spend down process, you can ensure that you receive the necessary care while protecting your financial future. Remember, you are not alone in this journey—resources and professionals are available to help you make informed decisions that align with your needs and goals. By taking proactive steps today, you can secure a more stable and comfortable tomorrow.